IS A COVENANT NOT TO COMPETE ENFORCEABLE AGAINST A FORMER FRANCHISEE WHO TERMINATES HIS FRANCHISE AND OPENS A NEW, NON BRAND NAME, STORE? (Part I)

By Fredrick P. Niemann, Esq. a New Jersey Covenant not to Compete Attorney

New Jersey courts have consistently held that the enforceability of a covenant not to compete is dependent on the reasonableness of the covenant.  It is a very fact intensive analysis that requires skilled guidance.  The New Jersey Supreme Court has enumerated eight factors that a court must look in order to determine whether a covenant not to compete is reasonable.  Our Courts look to:
1. The intention of the parties when the covenant was executed, and whether the parties had a viable purpose which did not at the time interfere with existing commercial laws, such as antitrust laws, or public policy.
2. Whether the covenant had an impact on the considerations exchanged when the covenant was originally executed.  This may provide a measure of the value to the parties of the covenant at the time.
3. Whether the covenant clearly and expressly sets forth the restrictions.
4. Whether the covenant was in writing, recorded, and if so, whether the subsequent grantee had actual notice of the covenant.
5. Whether the covenant is reasonable concerning area, time or duration. 
(In the past, the court has often found that covenants that extended for perpetuity, or beyond the terms of a lease, were unreasonable
6. Whether the covenant imposes an unreasonable restraint on trade or secures a monopoly for the covenantor.  This may be the case in areas where there is limited space available to conduct certain business activities and a covenant not to compete burdens all or most available locales to prevent them from competing in such an activity.
7. Whether the covenant interferes with the public interest.
8. Whether, even if the covenant was reasonable at the time it was executed, “changed circumstances” now make the covenant unreasonable.

Contact me personally today to discuss your covenant not to compete matter.  I am easy to talk to, very approachable and can offer you practical, legal ways to handle your concerns.  You can reach me toll free at (855) 376-5291 or e-mail me at fniemann@hnlawfirm.com/.

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